A practical, litigation-aware guide to when and how an employer may lawfully end employment because a worker can no longer perform the job due to medical reasons, and what protections and benefits the worker is entitled to. Written for HR, in-house counsel, physicians, and employees.

This is general information. Always align with your CBA, company policies, and current DOLE/SSS/EC rules.

1) The legal map at a glance

“Medical incompetence” is not a disciplinary offense. It is ordinarily an authorized cause termination due to disease/medical condition that prevents continued employment without risk and cannot be cured within six (6) months even with proper treatment.
If the condition is curable within six months or the employee can perform the essential functions with reasonable accommodation, termination is improper—use leave, light duty, reassignment, or accommodation instead.
If the employee falsified medical clearances or refuses lawful medical surveillance, that may be just cause (dishonesty/insubordination) and the twin-notice + hearing route applies—but that is different from “medical incompetence.”
Special laws limit or shape termination decisions: PWD law, Mental Health Act, HIV law, Maternity protections, OSH law, and Data Privacy law.

2) When is authorized cause termination for disease lawful?

All of the following must be present:

Medical basis: The employee has a disease/condition that makes continued employment prohibited by law or prejudicial to the employee’s health or that of co-workers; and
Futility window: A competent public health authority (or an occupational physician with the appropriate license/DOH accreditation, as accepted in practice) certifies in writing that the disease cannot be cured within six (6) months even with proper treatment; and
No reasonable accommodation is available without undue hardship and the employee cannot be effectively reassigned to a suitable, vacant position; and
Procedure & payouts are observed (30-day notice to employee and DOLE; separation pay; final pay; COE).

Key insight: The six-month horizon is pivotal. If the worker is expected to recover and safely return within six months, you cannot use disease as ground to terminate. Use leave/temporary assignment.

3) What counts as “medical incompetence”?

Think of inability to perform essential job functions—safely and reliably—due to health limitations, e.g.:

Permanent or long-term restrictions that disqualify from a bona fide occupational qualification (e.g., color-critical aviation roles, respirator-dependent jobs, safety-critical driving with uncontrolled seizures).
Chronic conditions with medically-supported restrictions that cannot be accommodated (even after schedule changes, tools, PPE, or reallocation of marginal tasks).
OSH-triggered unfitness (mandatory medical surveillance indicates employee cannot safely be exposed to the hazard and no alternative placement exists).

Not medical incompetence: Pregnancy; curable TB within 6 months; episodic conditions controlled with reasonable accommodation; mere age; HIV status per se; mental health conditions that can be accommodated.

4) Interaction with anti-discrimination and privacy laws

PWD (RA 7277 as amended): No discrimination on the basis of disability unless the disability reasonably prevents performance of the essential functions even with accommodation, or accommodation would cause undue hardship.
Mental Health Act (RA 11036): Protects employees from discrimination due to mental health conditions; requires access to support and reasonable workplace accommodation.
HIV law (RA 11166): Prohibits employment discrimination and mandatory testing/disclosure; termination based solely on HIV status is unlawful. Decisions must be individualized and risk-based.
Maternity rights: Pregnancy and related conditions are protected; dismissals on this basis are unlawful.
Data Privacy (RA 10173): Medical data are sensitive. Collect only what is necessary; store securely; need-to-know sharing only. Prefer OH physician to relay fitness-for-work conclusions (fit/unfit/restrictions) rather than raw diagnoses.

5) The lawful process (authorized cause: disease/medical condition)

Step 1 — Clinical evaluation & documentation

Obtain informed consent to request medical records and conduct fit-for-work/fitness-to-drive/fitness-to-wear-respirator assessments.
Secure a written medical opinion from a competent public health authority (or qualified OH physician) addressing:
1. Diagnosis & functional limitations (no unnecessary details in HR file).
2. Risks to self/co-workers if work continues.
3. Prognosis within six (6) months with proper treatment.
4. Recommended restrictions and whether these are permanent.

Step 2 — Interactive accommodation process

Meet with the employee (with counsel/union rep if applicable) to explore reasonable accommodations, such as:
- Modified schedule, assistive tech, PPE, additional breaks, job restructuring of marginal tasks, telework (if compatible), or temporary light duty.
- Reassignment to any vacant position the employee is qualified to perform with or without accommodation.
Document options, costs, and why an accommodation is effective or undue hardship.

Step 3 — If accommodation is not feasible and prognosis exceeds six months

Prepare two written notices, both dated at least 30 days before effectivity:
1. Notice to Employee: Grounds (medical condition; prognosis beyond six months; risks), summary of accommodation efforts, effectivity date, and separation pay computation.
2. Notice to DOLE (Regional Office): Same information and list of affected employees.

Step 4 — Separation pay & clearance

Pay separation pay of at least one (1) month salary or one-half (1/2) month salary per year of service, whichever is higher (a fraction of six months = one whole year).
Release final pay (including unused SIL if convertible), Certificate of Employment, and government separation reports.
Coordinate possible SSS sickness/disability and Employees’ Compensation claims (if work-aggravated or occupational).

No “twin-notice” hearing is required because this is non-disciplinary. The 30-day authorized-cause notice to both employee and DOLE is mandatory.

6) If the route is disciplinary (just cause), not medical

Only when the problem is misconduct, fraud, insubordination, or gross and habitual neglect unrelated to a protected medical limitation:

Twin-notice + hearing: (1) Notice to Explain detailing the act/omission and rule violated; (2) Opportunity to be heard (hearing or written conference); (3) Notice of Decision with factual/legal basis.
Impose sanctions proportionate to offense; never cloak medical inability as misconduct.

7) Special clusters & edge cases

Probationary employees: Non-regularization for failure to meet reasonable, pre-communicated standards is valid; if failure is due to a temporary medical episode and standards can be met with short extension or accommodation, consider those first to avoid discrimination issues.
Fixed-term contracts: May lapse by expiry; still avoid discriminatory non-renewal grounded on protected medical status.
Infectious disease (e.g., TB) curable < 6 months: Provide SSS sickness benefit, company sick leave, and temporary removal from exposure; termination on disease ground is improper.
Safety-critical roles: If medical standards are law-mandated (e.g., drivers with specific visual/neurologic criteria; confined space entrants needing respirator clearance), document the regulatory standard and unfitness finding; explore reassignment first.
Work-related illness/injury: EC/SSS disability benefits may apply; termination for disease remains available if the six-month criterion and notice + separation pay are satisfied, in addition to any EC/SSS claims.

8) Computation & paperwork—HR quick kit

A) Separation pay (authorized cause: disease)

Formula: Higher of
- 1 month salary, or
- 0.5 month salary × Years of Service (six months = 1 year).
Example: Basic ₱30,000; 7 years, 5 months → count 8 years.
- 0.5 × 8 × ₱30,000 = ₱120,000; compare with ₱30,000 → pay ₱120,000.

B) Mandatory notices (30 days before effectivity)

To Employee: reason (medical), summary of accommodation efforts, effectivity date, separation pay, COE assurance, government claim assistance.
To DOLE: mirror letter with headcount and roles affected.

C) Medical documents

Fitness-for-work report stating unfitness and >6-month prognosis.
Accommodation worksheet (options considered; undue hardship analysis).
Consent forms for medical data processing; HR file holds conclusions, not raw diagnoses.

D) Exit documents

Quitclaim/Release (optional; carefully drafted)—cannot waive statutory entitlements; provide time to consult counsel.
COE stating dates and position; avoid disclosing medical reason.

9) Common legal pitfalls (and how to avoid them)

No 30-day DOLE notice. Fatal procedural defect—risk of illegal dismissal.
No six-month prognosis from a competent authority. Termination premature.
Skipping accommodation discussion. Courts look for a good-faith interactive process.
Over-collection of medical data. Breach of Data Privacy; limit to fitness conclusions.
Using disease to mask redundancy/performance issues. Mischaracterization backfires.
No separation pay or wrong computation.
Disclosing diagnosis in the decision/COE. Keep it confidential.

10) Employee-side roadmap (if you face medical termination)

Ask for the bases: Request copies of fitness-for-work findings (conclusions), and your accommodation meeting notes.
Propose accommodations: Provide your physician’s work restrictions and timeline to fitness.
If fit within 6 months: Put it in writing; termination is improper—seek leave/temporary transfer.
If terminated: Check notice timing, separation pay, and government benefits (SSS sickness/disability; EC). Consider a money claim/illegal dismissal case if procedure/substance is defective.
Confidentiality: Object to any unnecessary disclosure of diagnosis.

11) Templates (short, adaptable)

A) Consent to Request Medical Information (limited)

I authorize [Company OH Physician] to obtain fitness-for-work findings (fit/unfit/restrictions/duration) from Dr. [Name]. No diagnosis or treatment details may be disclosed to HR. Valid for [90] days.
Employee: _______   Date: _______

B) 30-Day Authorized-Cause Notice (to Employee)

Subject: Authorized-Cause Termination (Disease) – 30-Day Notice

Dear [Employee],

Based on the attached fitness-for-work report by [Competent Public Health Authority] dated [____], your condition prevents safe performance of [essential functions] and cannot be cured within six (6) months despite proper treatment. We explored accommodations/reassignment on [dates], but none were feasible without undue hardship.

Your employment will end effective [date ≥ 30 days]. You will receive separation pay of [amount], final pay, and a Certificate of Employment. We will assist with SSS/EC claims.

Sincerely, HR

C) 30-Day DOLE Notice (Authorized Cause: Disease)

Re: 30-Day Notice of Termination Due to Disease (Art. [disease ground])

This is to notify DOLE that [Company] will terminate the employment of [Name, position] effective [date], due to disease certified by [authority] as not curable within six months, after unsuccessful accommodation/reassignment efforts. Separation pay of [amount] shall be paid on [date].

12) Comparison table—Which path is this?

Situation	Proper Route	Core Proof	Procedure	Payout
Long-term unfitness; >6-mo prognosis; no feasible accommodation	Authorized cause: disease	Medical certification + accommodation file	30-day notice to employee & DOLE; separation pay	≥ 1 month or ½ month/year, higher
Short-term unfitness (<6 data-preserve-html-node="true" months)	Leave/temporary assignment	Treating/OH physician note	Sick leave/SSS sickness; RTW plan	No separation pay
Refusal of lawful medical surveillance / safety rule	Just cause (insubordination)	Rule, order, refusal record	Twin notice + hearing	No separation pay (if just cause proven)
Falsified medical certificate	Just cause (dishonesty)	Forensic/issuing-clinic proof	Twin notice + hearing	No separation pay (if just cause proven)

13) Bottom line

Substance: Termination for “medical incompetence” is valid only when a competent authority certifies >6-month incurability and continued work is unsafe/prejudicial, with no reasonable accommodation/reassignment available.
Process: Observe the 30-day dual notice (employee & DOLE) and pay the correct separation pay.
Protection: Respect anti-discrimination and privacy laws; keep decisions focused on essential functions and safety, not diagnoses.
Alternatives: If recovery is expected within six months or accommodation works, retain employment via leave, light duty, or transfer.

If you share the job’s essential functions, the medical restrictions, and the company’s size/resources, I can draft a tailored accommodation matrix and a compliant notice pack for your specific case.